AB Credit Opportunities Fund

AB Credit Opportunities Fund is a statutory trust recently formed under the laws of the State of Delaware and registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), as a continuously offered management investment company that is operated as an interval fund. The Fund is offering through this prospectus two separate classes of common shares of beneficial interest (“Shares”) designated as Class A (“Class A Shares”) and Advisor Class (“Advisor Shares”). The Fund intends to elect to be treated and to qualify annually as a regulated investment company (“RIC”) for federal income tax purposes under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

. Shareholders do not have the right to cause the Fund to redeem their Shares. No public market for the Shares exists, and the Fund contemplates that one will not develop. As an interval fund, the Fund will, subject to applicable law, conduct quarterly repurchase offers for between 5% and 25% of the Fund’s outstanding Shares at net asset value (“NAV”), as further described below under “” Even though the Fund will make quarterly repurchase offers to repurchase a portion of the Shares, shareholders should consider the Shares to be illiquid.

. The Fund’s investment objective is to seek to deliver a high level of total return through income and capital appreciation. There can be no assurance that the Fund will achieve its investment objective.

The Fund seeks to achieve its investment objective by investing primarily in credit investments (collectively, the “Credit Investments”), which are defined as fixed income securities with a credit rating below Under normal circumstances, the Fund will invest at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of investment and quarterly) in a portfolio of Credit Investments. Credit Investments include municipal securities, taxable municipals and taxable securities. The Fund may invest in Credit Investments with any maturity or duration. The Fund may invest up to 35% in securities, including corporate debt securities, mortgage backed and other asset-backed securities, loans, preferred equity, and derivatives.

The Fund seeks to invest in high yield municipal securities in both publicly syndicated market transactions and directly sourced opportunities. Publicly syndicated market transactions are generally available to a broad range of investors and are executed in the (“OTC”) market by market maker dealers or from an underwriter for newly-issued securities. Directly sourced municipal transactions are a specialty type of financing in the municipal market that generally involve direct and enhanced interactions with issuers and underwriters and

 

involve a smaller number of investors than publicly syndicated transactions. Directly sourced municipal transactions involve enhanced due diligence, investor partnership, and transaction complexity. Certain complex municipal transactions are not easily financed through traditional public offering channels due to the specific challenges or needs of the borrower. This complexity creates the opportunity for AllianceBernstein, L.P., the Adviser, to add value to the Fund’s investors by adding value to borrowers in such transactions. Directly sourced high yield transactions may offer investor benefits including, among others: (i) yield premiums relative to similar public market issuances; (ii) enhanced due diligence through early involvement, providing additional time to conduct fundamental credit analysis and evaluate risks; (iii) direct relationships with borrowers, providing the benefits of future transaction opportunities and ongoing risk mitigation; and (iv) capital gain opportunities derived from yield premiums at issuance and the Adviser’s underwriting and legal structuring expertise.

 

 

 

 

 

 

 

 

 

 

 

 

Investing in Fund Shares involves a high degree of risk. See “Risk Factors and Special Considerations.”

This prospectus provides information that you should know about the Fund before investing. Please read this prospectus carefully and keep it for future reference. Information required to be in the Fund’s Statement of Additional Information is found in this prospectus.

(http://www.sec.gov

227-4618.

Shares are not deposits or obligations of, and are not guaranteed or endorsed by, any bank or other insured depository institution, and Shares are not insured by the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System or any other government agency.

The date of this prospectus is [    ], 2026

TO ALL INVESTORS

This prospectus will not constitute an offer to sell or the solicitation of an offer to buy, no sale of shares will be made, in any jurisdiction in which the offer, solicitation or sale is not authorized or to any person to whom it is unlawful to make the offer, solicitation or sale. No person has been authorized to make any representations concerning the Fund that are inconsistent with those contained in this prospectus. Prospective investors should not rely on any information other than the information contained in this prospectus. Prospective investors should not construe the contents of this prospectus as legal, tax or financial advice. Each prospective investor should consult his, her or its own professional advisors as to the legal, tax, financial or other matters relevant to the suitability of an investment in the for the investor.

TLE OF CONTENTS

 

Overview of the Fund

The Fund is a Delaware statutory trust that is registered as a continuously offered non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund is operated as an “interval fund”.

The Fund currently offers two separate classes of shares designated as Class A Shares and Advisor Shares (“Shares”). The Fund relies on exemptive relief from the Securities and Exchange Commission (the “SEC”) to, among other things, issue multiple classes of Shares and to impose asset-based distribution fees and early-withdrawal fees as applicable (the “Multi-Class Exemptive Relief”). The Fund may offer other additional classes of Shares in the future with fees and expenses that differ from the classes of Shares described herein.

Investment Objective

The Fund’s investment objective is to seek to deliver a high level of after-tax total return through income and capital appreciation. There can be no assurance that the Fund will achieve its investment objective, be able to structure its investments as anticipated, or that its returns will be positive over any period of time. The Fund is not intended as a complete investment program for investors.

Investment Strategy

The Fund intends to achieve its investment objective by investing primarily in Credit Investments, which are defined as fixed income securities with a credit rating below AA-. Under normal circumstances, the Fund will invest at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of investment and quarterly) in a portfolio of Credit Investments. The Credit Investments include tax-exempt municipal securities, taxable municipals and taxable securities. The Fund may invest up to 35% in non-municipal securities, including corporate debt securities, non-government mortgage backed and other asset-backed securities, loans, preferred equity, and derivatives. At times, the Fund will invest a significant portion of its assets in Credit Investments that are rated below investment grade by rating agencies or are unrated. Such investments may include defaulted or partially defaulted loans. Credit Investments that are rated below investment grade (commonly referred to as “high yield” securities or “junk bonds”) are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Some of the Credit Investments will have no public credit rating. The absence of a public credit rating does not reflect the credit quality of a security and a significant portion of securities are unrated, as obtaining a rating is often not economically practical for a given issuance.

 

1

The Fund seeks to invest in high yield municipal securities in both publicly syndicated market transactions and directly sourced opportunities. Publicly syndicated market transactions are generally available to a broad range of investors and are executed in the over-the-counter (“OTC”) market by market maker dealers or from an underwriter for newly-issued securities and involve a smaller number of investors than publicly syndicated transactions. Directly sourced municipal transactions are a specialty type of financing in the municipal market that generally involve direct and enhanced interactions with issuers and underwriters. Directly sourced municipal transactions involve enhanced due diligence, investor partnership, and transaction complexity. Certain complex municipal transactions are not easily financed through traditional public offering channels due to the specific challenges or needs of the borrower. This complexity creates the opportunity for AllianceBernstein, L.P., the Adviser, to add value to the Fund’s investors by adding value to borrowers in such transactions. Directly sourced high yield transactions may offer investor benefits including, among others: (i) yield premiums relative to similar public market issuances; (ii) enhanced due diligence through early involvement, providing additional time to conduct fundamental credit analysis and evaluate risks; (iii) direct relationships with borrowers, providing the benefits of future transaction opportunities and ongoing risk mitigation; and (iv) capital gain opportunities derived from yield premiums at issuance and the Adviser’s underwriting and legal structuring expertise. The Adviser’s credit research team evaluates potential directly sourced opportunities and presents them to the portfolio management team for discussion. Every bond receives an internal credit research rating and is actively monitored throughout the duration of the investment.

The Fund’s 80% policy with respect to investments in Credit Investments is not fundamental and may be changed by the Board without shareholder approval if the Fund conducts a tender or repurchase offer to allow shareholders to redeem shares in advance of changing the Fund’s 80% policy, the Fund provides shareholders at least 60 days’ prior written notice of any change to the 80% policy in advance of such tender or repurchase offer in the manner prescribed by the SEC, and the tender or repurchase offer, as applicable, is not oversubscribed. In the event of a tender offer, the Fund will purchase the shares at their net asset value. The Fund’s investments in derivatives (valued at their notional amount for purposes of the Fund’s 80% policy), other investment companies and other instruments are counted towards the Fund’s 80% investment policy to the extent they provide investment exposure to Credit Investments or to market risk factors associated with the investment focus suggested by the Fund’s name.

The Adviser selects securities for purchase or sale based on its assessment of the securities’ risk and return characteristics as well as the securities’ impact on the overall risk and return characteristics of

 

2

the Fund. In making this assessment, the Adviser takes into account various factors, including credit quality, covenant protection, yield, relative value, bond structure, diversification benefits, relative expected after-tax returns of municipal and taxable securities, and sensitivity to interest rates of the securities under consideration and of the Fund’s other holdings. The Fund may invest in: forward commitments; tender option bonds (“TOBs”); zero-coupon municipal securities and variable, floating and inverse floating-rate municipal securities; certain types of mortgage-related securities; and derivatives, such as options, futures contracts, forwards and swaps. The Fund may also from time to time invest in securities of other investment companies, including exchange-traded funds, to the extent that these investments are consistent with the Fund’s investment objective, strategies and policies and are permissible under the 1940 Act or any applicable exemption therefrom.

The Fund may enter into TOB transactions in which the Fund transfers one or more municipal securities into a special purpose entity (the “TOB Trust”). The Fund receives cash and a residual interest security (sometimes referred to as “inverse floaters”) issued by the TOB Trust in return. The TOB Trust simultaneously issues securities that pay an interest rate that is reset each week based on an index of high-grade short-term demand notes. These securities (sometimes referred to as “floaters”) are bought by third parties, including tax-exempt money market funds, and can be tendered by these holders to a liquidity provider at par, unless certain events occur. The floaters typically have first priority on the cash flow from the underlying municipal securities held by the TOB Trust, and the remaining cash flow, less certain expenses, is paid to holders of the inverse floaters. The interest rate payable on the inverse floaters bears an inverse relationship to the interest rate on the floaters. Under certain circumstances, the TOB Trust may be terminated or collapsed, either by the Fund or upon the occurrence of certain events, such as a downgrade in the credit quality of the underlying municipal securities or in the event holders of the floaters tender their securities to the liquidity provider. The Fund continues to earn all the interest from the transferred municipal securities less the amount of interest paid on the floaters and the expenses of the TOB Trust, which may include payments to the trustee and the liquidity provider and organizational costs. The Fund receives cash proceeds from the TOB Trust’s sale of the floaters as consideration for the transferred municipal securities and uses the cash proceeds for investment purposes (e.g., the purchase of longer-term municipal securities), which involves leverage.

To the extent permitted by law, the Fund intends to co-invest in investments with other investment funds, separately managed accounts, proprietary accounts and other investment vehicles managed by the Adviser or its affiliates (collectively, the “Other Accounts”). The 1940 Act imposes significant limits on the ability of the Fund to co-invest with Other Accounts. The Adviser and the Fund

 

3

rely on an exemptive order from the SEC that permits the Fund to co-invest alongside its affiliates in investments (the “Exemptive Order”), subject to certain conditions that limit or restrict the Fund’s ability to participate in such investments. In such cases, the Fund may participate in an investment to a lesser extent or, under certain circumstances, may not participate in the investment.

Use of Leverage

The Fund may use leverage as and to the extent permitted by the 1940 Act. The Fund is permitted to obtain leverage using any form of financial leverage instruments, including through transactions involving TOBs, variable rate muni term preferred shares, variable rate demand preferred shares, and municipal securitizations, funds borrowed from banks or other financial institutions, margin facilities, notes or preferred stock and leverage attributable to reverse repurchase agreements or similar transactions.

With respect to senior securities representing indebtedness, other than temporary borrowings as defined under the 1940 Act, the Fund is required under current law to have an asset coverage of at least 300%, as measured at the time of borrowing and calculated as the ratio of the Fund’s total assets (less all liabilities and indebtedness not represented by senior securities) over the aggregate amount of the Fund’s outstanding senior securities representing indebtedness. With respect to senior securities that are preferred stock, the Fund is required under current law to have an asset coverage of at least 200%, as measured at the time of the issuance of any such shares of preferred stock and calculated as the ratio of the Fund’s total assets (less all liabilities and indebtedness not represented by senior securities) over the aggregate amount of the Fund’s outstanding senior securities representing indebtedness plus the aggregate liquidation preference of any outstanding shares of preferred stock.

Selected Risk Factors

The following discussion of selected risk factors associated with an investment is intended to offer a summary of certain principal risks of investing in Fund Shares. Shareholders should review the broader discussion of Fund risks included in the “Risk Factors and Special Considerations” section of this prospectus before making an investment in the Fund. Different risks may be more significant at different times depending on market conditions.

General Market Risks

General Risk . Investing in the Fund involves certain risks and the Fund may not be able to achieve its intended results for a variety of reasons, including, among others, the possibility that the Adviser may not be able to structure the Fund’s investment program as anticipated.

Any investment in financial instruments carries certain market risks. An investment in the Fund is highly speculative and involves a high degree of risk due to the nature of the Fund’s investments and the

 

4

investment strategies and trading strategies to be employed by the Fund. An investment in the Fund should not in itself be considered a balanced investment program. Shareholders should be able to withstand the loss of their entire investment.

General Economic and Market Conditions Risk. The success of the Fund will be affected by general economic and market conditions, such as changes in interest rates, availability of credit, credit defaults, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation of the Fund’s investments), trade barriers (including tariffs) and sanctions, currency exchange controls, market structure, liquidity, transparency and access, capital and margin requirements affecting the Fund, its intermediaries and national and international political circumstances (including wars, terrorist acts or security operations). These factors may affect the level and volatility of financial instruments’ prices and the liquidity of the Fund’s investments. Volatility or illiquidity could impair the Fund’s profitability or result in losses. The Fund may maintain substantial trading positions that can be adversely affected by the level of volatility in the financial markets — the larger the positions, the greater the potential for loss.

Market Disruptions and Geopolitical Events Risk. Market disruption can be caused by economic, financial or political events and factors, including but not limited to, geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), international wars, instability or conflicts in regions such as Asia, Eastern Europe and the Middle East (and the global responses thereto), terrorism, natural disasters and public health epidemics and pandemics. The extent and duration of such events and resulting market disruptions cannot be predicted but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, disruptions to interest and inflation rates, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or government intervention. They may also cause short- or long-term economic uncertainties in the United States and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted.

Widespread disease, including the outbreak of pandemics and epidemics, and natural or environmental disasters, such as earthquakes, droughts, fires, floods, hurricanes, tsunamis and climate-related phenomena generally, have been and can be highly disruptive to economies and markets, adversely impacting individual companies,

 

5

INVESTMENT OBJECTIVE

The investment objective of the Fund will be to seek to deliver a high level of after-tax total return through income and capital appreciation. The Fund seeks to achieve its investment objective by investing primarily in credit investments (collectively, the “Credit Investments”), which are defined as fixed income securities with a credit rating below AA-. Credit Investments include tax-exempt municipal securities, taxable municipals and taxable securities.

INVESTMENT STRATEGY

Under normal circumstances, the Fund will invest at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of investment and quarterly) in a portfolio of Credit Investments. The Credit Investments include tax-exempt municipal securities, taxable municipals and taxable securities. The Fund may invest up to 35% in non-municipal securities, including corporate debt securities, non-government mortgage backed and other asset-backed securities, loans, preferred equity, and derivatives. At times, the Fund will invest a significant portion of its assets in Credit Investments that are rated below investment grade by rating agencies or are unrated. Such investments may include defaulted or partially defaulted loans. Credit Investments that are rated below investment grade (commonly referred to as “high yield” securities or “junk bonds”) are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Some of the Credit Investments will have no public credit rating. The absence of a public credit rating does not reflect the credit quality of a security and a significant portion of securities are unrated, as obtaining a rating is often not economically practical for a given issuance.

The Fund seeks to invest in high yield municipal securities in both publicly syndicated market transactions and directly sourced opportunities. Publicly syndicated market transactions are generally available to a broad range of investors and are executed in the OTC market by market maker dealers or from an underwriter for newly-issued securities. Directly sourced municipal transactions are a specialty type of financing in the municipal market that generally involve direct and enhanced interactions with issuers and underwriters and involve a smaller number of investors than publicly syndicated transactions. Directly sourced municipal transactions involve enhanced due diligence, investor partnership, and transaction complexity. Certain complex municipal transactions are not easily financed through traditional public offering channels due to the specific challenges or needs of the borrower. This complexity creates the opportunity for AllianceBernstein, L.P., the Adviser, to add value to the Fund’s investors by adding value to borrowers in such transactions. Directly sourced high yield transactions may offer investor benefits including, among others: (i) yield premiums relative to similar public market issuances; (ii) enhanced due diligence through early involvement, providing additional time to conduct fundamental credit analysis and evaluate risks; (iii) direct relationships with borrowers, providing the benefits of future transaction opportunities and ongoing risk mitigation; and (iv) capital gain opportunities derived from yield premiums at issuance and the Adviser’s underwriting and legal structuring expertise. The Adviser’s credit research team evaluates potential directly sourced opportunities and presents them to the

 

24

portfolio management team for discussion. Every bond receives an internal credit research rating and is actively monitored throughout the duration of the investment.

The Fund’s 80% policy with respect to investments in Credit Investments is not fundamental and may be changed by the Board without shareholder approval if the Fund conducts a tender or repurchase offer to allow shareholders to redeem shares in advance of changing the Fund’s 80% policy, the Fund provides shareholders at least 60 days’ prior written notice of any change to the 80% policy in advance of such tender or repurchase offer in the manner prescribed by the SEC, and the tender or repurchase offer, as applicable, is not oversubscribed. The Fund’s investments in derivatives (valued at their notional amount for purposes of the Fund’s 80% policy), other investment companies and other instruments are counted towards the Fund’s 80% investment policy to the extent they provide investment exposure to Credit Investments or to market risk factors associated with the investment focus suggested by the Fund’s name.

The Adviser selects securities for purchase or sale based on its assessment of the securities’ risk and return characteristics as well as the securities’ impact on the overall risk and return characteristics of the Fund. In making this assessment, the Adviser takes into account various factors including the credit quality and sensitivity to interest rates of the securities under consideration and of the Fund’s other holdings. The Fund may invest in: forward commitments; tender option bonds (“TOBs”);

zero-coupon

municipal securities and variable, floating and inverse floating-rate municipal securities; certain types of mortgage-related securities; and derivatives, such as options, futures contracts, forwards and swaps. The Fund may also from time to time invest in securities of other investment companies, including exchange-traded funds, to the extent that these investments are consistent with the Fund’s investment objective, strategies and policies and are permissible under the 1940 Act or any applicable exemption therefrom.

The Fund may enter into TOB transactions in which the Fund transfers one or more municipal securities into a special purpose entity (the “TOB Trust”). The Fund receives cash and a residual interest security (sometimes referred to as “inverse floaters”) issued by the TOB Trust in return. The TOB Trust simultaneously issues securities that pay an interest rate that is reset each week based on an index of high-grade short-term demand notes. These securities (sometimes referred to as “floaters”) are bought by third parties, including

tax-exempt

money market funds, and can be tendered by these holders to a liquidity provider at par, unless certain events occur. The floaters typically have first priority on the cash flow from the underlying municipal securities held by the TOB Trust, and the remaining cash flow, less certain expenses, is paid to holders of the inverse floaters. The interest rate payable on the inverse floaters bears an inverse relationship to the interest rate on the floaters. Under certain circumstances, the TOB Trust may be terminated or collapsed, either by the Fund or upon the occurrence of certain events, such as a downgrade in the credit quality of the underlying municipal securities or in the event holders of the floaters tender their securities to the liquidity provider. The Fund continues to earn all the interest from the transferred municipal securities less the amount of interest paid on the floaters and the expenses of the TOB Trust, which may include payments to the trustee and the liquidity provider and organizational costs. The Fund receives cash proceeds from the TOB Trust’s sale of the floaters as consideration for the transferred municipal securities and uses the cash proceeds for investment purposes (e.g., the purchase of longer-term municipal securities), which involves leverage.

The Fund is permitted to invest, without limitation, directly or indirectly, on margin or otherwise, in securities, other financial instruments of U.S. and

non-U.S.

entities and other assets, including capital stock; shares of beneficial interest; partnership interests and similar financial instruments; bonds, notes and debentures (whether subordinated, convertible or otherwise); claims or other causes of action, matured or unmatured, contingent or otherwise, of creditors and/or equity holders of any person against such person, including, without limitation, “claims” and “interests,” in each case as defined under title 11 of the United States Code entitled “Bankruptcy,” as the same may be hereafter amended from time to time, and any successor statute or statutes thereto, and all rights and options relating to the foregoing; currencies; commodities; physical and intangible assets; interest rate, currency, commodity, equity and other derivative products, including (i) futures contracts (and options thereon) relating to stock indices, currencies, U.S. Government securities and securities of

non-U.S.

 

25

governments, other financial instruments and all other commodities, (ii) swaps, options, swaptions, warrants, caps, collars, floors and forward rate agreements, (iii) spot and forward currency transactions and (iv) agreements relating to or securing such transactions; repurchase and reverse repurchase agreements; loans; structured finance instruments; accounts and notes receivable and payable held by trade or other creditors; trade acceptances; contract and other claims; executory contracts; participations; mutual funds, exchange-traded funds and similar financial instruments; money market funds; obligations of the United States or any

non-U.S.

government, or any country, state, governmental agency or political subdivision thereof; commercial paper; certificates of deposit; bankers’ acceptances; choses in action; trust receipts; and any other obligations and instruments or evidences of indebtedness of whatever kind or nature that exist now or are hereafter created, in each case, of any person, whether or not publicly traded or readily available.

Investment Process

. The Adviser adheres to an established credit research and investment process framework. The Adviser’s research team will evaluate potential opportunities and present them to the portfolio management team for discussion on the credit’s attractiveness and its suitability for inclusion in the portfolio. Furthermore, every bond receives an internal credit research rating and is actively monitored throughout the duration of the investment. The Adviser’s fundamental credit analysis is a dynamic, multi-layered process that combines

top-down

macroeconomic insights,

bottom-up

issuer-specific evaluations, and technology-driven screening tools to assess municipal creditworthiness across a broad universe of securities. The process begins with a macro-level perspective to identify systemic risks and opportunities that influence municipal credit markets, including macro analysis of inflation and interest rate projections, demographic shifts and population trends, and global liquidity conditions and investor risk appetite, as well as industry analysis encompassing regulatory and legal frameworks, the political landscape and policy direction, and sector-specific pressures and structural challenges. These insights inform sector allocation and help establish broader risk targets. The Adviser then conducts detailed security-level analysis to evaluate the strength and stability of individual issuers, incorporating qualitative security analysis of management quality and experience, covenant protections and legal safeguards, and governance standards and disclosure practices, together with quantitative security analysis of historical financial performance, debt service coverage and liquidity metrics,

pro-forma

capital structure assessments, and collateral valuation relative to outstanding debt. This dual-layered approach provides a comprehensive understanding of each issuer’s credit profile.

Additional Information Regarding the Fund’s Investment Strategy

There can be no assurance that the investment strategies employed by the Adviser will be successful or result in the investment objective of the Fund being achieved. In addition, the investment strategies utilized by the Fund are subject to certain limitations as a result of its registration under the 1940 Act and its intention to be treated as a RIC under Subchapter M of the Code. See “Investment Restrictions,” and “U.S. Federal Income Tax Considerations.”

Co-Investment

Exemptive Relief

To the extent permitted by law, the Fund intends to

co-invest

in investments with Other Accounts. The 1940 Act imposes significant limits on the ability of the Fund to

co-invest

with Other Accounts. The Adviser and the Fund rely on the Exemptive Order subject to certain conditions that limit or restrict the Fund’s ability to participate in such investments. In such cases, the Fund may participate in an investment to a lesser extent or, under certain circumstances, may not participate in the investment.

Short-Term Investments

For temporary defensive purposes, the Fund may invest up to 100% of its assets in cash equivalents and short-term debt securities. The Fund may also utilize short-term investments for cash management purposes. Short-term investments are short-term debt obligations and other similar securities and may include (i) securities issued or guaranteed as to interest and principal by the U.S. Government or one of its agencies or

 

26

instrumentalities; (ii) debt obligations of U.S. banks, savings associations, insurance companies and mortgage bankers; (iii) commercial paper and other short-term obligations of corporations, partnerships, trusts and similar entities; (iv) repurchase agreements; (v) other investment companies that invest principally in money market instruments; and (vi) variable-rate demand obligations. Money market instruments include longer-term bonds that have variable interest rates, demand features or other special features that give them the financial characteristics of short-term debt. The Fund also may hold cash and cash equivalents and may invest in participation interests in the money market securities mentioned above without limitation.

RISK FACTORS AND SPECIAL CONSIDERATIONS

An investment in the Fund is speculative and involves a high degree of risk and should not constitute a complete investment program. Before making an investment decision, you should carefully consider the following risk factors, together with the other information contained in this prospectus. At any point in time, an investment in the Fund’s shares may be worth less than the original amount invested, even after taking into account the distributions paid, if any, and the ability of shareholders to reinvest distributions. If any of the risks discussed in this prospectus occur, the Fund’s results of operations could be materially and adversely affected. If this were to happen, the price of Fund shares could decline significantly and you could lose all or a part of your investment. Different risks may be more significant at different times depending on market conditions.

General Market Risks

General Risk. Investing in the Fund involves certain risks and the Fund may not be able to achieve its intended results for a variety of reasons, including, among others, the possibility that the Adviser may not be able to structure the Fund’s investment program as anticipated.

Any investment in financial instruments carries certain market risks. An investment in the Fund is highly speculative and involves a high degree of risk due to the nature of the Fund’s investments and the investment strategies and trading strategies to be employed by the Fund. An investment in the Fund should not in itself be considered a balanced investment program. Shareholders should be able to withstand the loss of their entire investment.

General Economic and Market Conditions Risk. The success of the Fund will be affected by general economic and market conditions, such as changes in interest rates, availability of credit, credit defaults, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation of the Fund’s investments), trade barriers (including tariffs and sanctions), currency exchange controls, market structure, liquidity, transparency and access, capital and margin requirements affecting the Fund, its intermediaries and national and international political circumstances (including wars, terrorist acts or security operations). These factors may affect the level and volatility of financial instruments’ prices and the liquidity of the Fund’s investments. Volatility or illiquidity could impair the Fund’s profitability or result in losses. The Fund may maintain substantial trading positions that can be adversely affected by the level of volatility in the financial markets — the larger the positions, the greater the potential for loss.

Market Disruptions and Geopolitical Events Risk. Market disruption can be caused by economic, financial or political events and factors, including but not limited to, geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), international wars, instability or conflicts in regions such as Asia, Eastern Europe and the Middle East (and the global response thereto), terrorism, natural disasters and public health epidemics and pandemics. The extent and duration of such events and resulting market disruptions cannot be predicted, but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, disruptions to interest and inflation rates, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or government

 

27

intervention. They may also cause short- or long-term economic uncertainties in the U.S. and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted.

Widespread disease, including pandemics and epidemics, and natural or environmental disasters, such as earthquakes, droughts, fires, floods, hurricanes, tsunamis and climate-related phenomena generally, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund’s investments. Additionally, market disruptions may result in increased market volatility; regulatory trading halts; closure of domestic or foreign exchanges, markets or governments; or market participants operating pursuant to business continuity plans for indeterminate periods of time. Further, market disruptions can (i) prevent the Fund from executing advantageous investment decisions in a timely manner, (ii) negatively impact the Fund’s ability to achieve its investment objective, as well as the operations of the Fund and the Adviser, and (iii) exacerbate the risks discussed elsewhere in this prospectus, including political, social and economic risks.

Global economies and financial markets have become increasingly interconnected, which increases the possibility that economic, financial or political events and factors in one country or region might adversely impact issuers in a different country or region or worldwide.

Consequently, the Fund may not be capable of, or successful at, preserving the value of their assets, generating positive investment returns or effectively managing their risks.

Systemic Risk.

Systemic risk is the risk of broad financial system stress or collapse triggered by the default of one or more financial institutions, which results in a series of defaults by other independent financial institutions. Financial intermediaries, such as clearinghouses, banks, securities firms and exchanges with which the Fund interacts are all subject to systemic risk. A systemic failure could have material adverse consequences on the Fund and on the markets for the investments in which the Fund seeks to invest.

Certain Risks Related to Investment Strategies by the Fund

Interest Rate Risk. Changes in interest rates can affect the value of the Fund’s investments in fixed-income instruments. When interest rates increase, fixed income securities or instruments held by the Fund will generally decline in value. A wide variety of factors can cause interest rates to rise, including central bank monetary policies and, inflation rates, governmental actions and other factors. Sustained future interest rate volatility may cause the value of the fixed-income securities held by the Fund to decrease, which may result in substantial withdrawals from the Fund that, in turn, forces the Fund to liquidate such securities at disadvantageous prices negatively impacting the performance of the Fund.

Competition; Availability of Investments Risk. The identification of attractive investment opportunities is difficult and involves a high degree of uncertainty. There can be no assurance that the Fund will be able to identify or successfully pursue attractive investment opportunities in the markets in which the Fund intends to invest for many reasons, including competition for attractive investment opportunities and changes in markets or economic conditions. As a result, there can be no assurance that there will be a sufficient number of suitable investment opportunities to enable the Fund to invest all of its capital in opportunities that satisfy the Fund’s investment objectives or that such investment opportunities will lead to completed investments by the Fund.

Leverage Risk. The Fund intends to utilize leverage and may utilize leverage to the maximum extent permitted by law for investment and other general corporate purposes. The Fund may obtain leverage through TOBs or through forward commitments, reverse repurchase agreements, and other financing transactions,

 

28

including by issuing preferred shares and/or notes, and borrowing funds from banks and other financial institutions. The Fund may also gain leverage synthetically through swaps and other derivatives. The use of leverage to purchase additional securities creates an opportunity for increased Share dividends, but also creates risks for the Fund’s shareholders, including increased variability of the Fund’s net income, distributions, and/or NAV. Leverage is a speculative technique that exposes the Fund to greater risk and increased costs than if it were not implemented. Increases and decreases in the value of the Fund’s portfolio will be magnified if the Fund uses leverage. As a result, leverage may cause greater changes in the Fund’s NAV, which will be borne entirely by the Fund’s shareholders. To the extent that the Fund makes investments in debt instruments structured with floating rate floors, the Fund will not realize additional income if rates increase during periods when the applicable floating rate remains below the corresponding floor but the Fund’s cost of financing is expected to increase, resulting in the potential for a decrease in the level of income available for dividends or distributions made by the Fund. If the Fund engages in borrowings, it will pay interest on its borrowings, which will increase expenses and may reduce the Fund’s return. These dividend payments or interest expenses (which will be borne entirely by shareholders) may be greater than the Fund’s return on the underlying investments. The Fund’s leveraging strategy, if utilized, may not be successful.

During periods of rising short-term interest rates, the interest paid on floaters in TOBs would increase, which may adversely affect the Fund’s net return. If rising short-term rates coincide with a period of rising long-term rates, the value of securities with longer-term maturities purchased with the proceeds of leverage would decline, adversely affecting the Fund’s NAV. In certain circumstances, adverse changes in interest rates or other events could cause a TOB trust to terminate or collapse, potentially requiring the Fund to liquidate the longer term securities at unfavorable prices to meet the Fund’s outstanding obligations. Rule

18f-4

under the 1940 Act imposes limits on the Fund’s utilization of certain derivatives and other forms of leverage. Rule

18f-4,

among other things, permits a fund to treat TOBs (and other similar financing transactions) either as borrowings (subject to asset coverage requirements under the 1940 Act) or as “derivatives transactions” subject to certain risk-based limits of Rule

18f-4.

The Fund may issue preferred shares and/or notes or other forms of indebtedness as a form of leverage. These means of obtaining leverage would be senior to the Fund’s Shares, such that holders of preferred shares and/or notes or other Fund indebtedness would have priority over the shareholders in the distribution of the Fund’s assets, including dividends, distributions of principal and liquidating distributions. In addition, if the Fund elects to issue preferred shares and/or notes (or other forms of indebtedness) its ability to make distributions to its shareholders or to repurchase its shares will be limited by the asset coverage requirements and other limitations imposed by the 1940 Act and the Fund’s lenders.

As a

closed-end

management investment company, the Fund is permitted, under specified conditions, to issue senior securities that are stock if the Fund’s asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after issuance. As defined in the 1940 Act, asset coverage of 200% means that for every $100 of net assets the Fund holds, the Fund may raise $100 from issuing senior securities. Under the 1940 Act, any preferred stock the Fund issues would constitute a “senior security” for purposes of the 200% asset coverage test.

In addition, while any senior securities remain outstanding, the Fund may be required to make provisions to prohibit any dividend distribution to the Fund’s shareholders or the repurchase of such securities or shares unless the Fund meets the applicable asset coverage ratios at the time of the distribution or repurchase after giving effect to the distribution or repurchase. The Fund is also permitted to borrow amounts up to 5% of the value of the Fund’s total assets for temporary purposes without regard to asset coverage, which borrowings would not be considered senior securities, provided that any such borrowings in excess of 5% of the value of the Fund’s total assets would be subject to the asset coverage ratio requirements of the 1940 Act, even if for temporary purposes.

The Fund will pay (and shareholders will bear) all costs and expenses relating to the issuance and ongoing maintenance of any preferred shares and/or notes or other forms of indebtedness issued by the Fund. As a result, the Fund cannot assure you that the issuance of preferred shares and/or notes or other forms of indebtedness will provide a higher yield or return to the holders of the Fund’s Shares. If the Fund offers and/or issues preferred shares and/or notes or other forms of indebtedness, the costs of the offering will be borne immediately by the Fund’s shareholders and result in a reduction of the NAV of the Fund’s Shares.

 

29

So long as the Fund’s portfolio provides a higher rate of return, net of expenses, than the interest rate on borrowed money, the leverage may cause shareholders to receive a higher current rate of return than if the Fund were not leveraged. If, however, long-term and/or short-term rates rise, the interest rate on borrowed money could exceed the rate of return on securities held by the Fund, reducing returns to shareholders. Developments in the credit markets may adversely affect the ability of the Fund to borrow for investment purposes and may increase the costs of such borrowings, which would reduce returns to shareholders.

There is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations for shareholders, including:

 

•

the likelihood of greater volatility of NAV, market price and dividend rate of Shares than a comparable portfolio without leverage;

 

•

the risk that fluctuations in interest rates on borrowings or in dividend payments on, principal proceeds distributed to, or redemption of any preferred shares and/or notes or other forms of indebtedness that the Fund has issued will reduce the return to the shareholders;

 

•

the effect of leverage in a declining market, which is likely to cause a greater decline in the NAV of the Fund’s Shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the Fund’s Shares; and

 

•

leverage may increase expenses (which will be borne entirely by shareholders), which may reduce total return.

Effects of Leverage. The table below assumes that the Fund’s borrowings represent approximately 20.4% of the Fund’s net assets and that the Fund bears expenses related to such borrowings at an annual effective interest rate of 3.2% (based on interest rates for such borrowing as of a recent date). The table below also assumes that the annual return that the Fund’s portfolio must experience (net of expenses not related to borrowings) in order to cover the costs of such borrowings would be approximately 0.65%. These figures are estimates based on current market conditions, used for illustration purposes only. Actual expenses associated with borrowings used by the Fund may vary frequently and may be significantly higher or lower than the rate used for the example above.

The following table is furnished in response to requirements of the SEC. It is designed to illustrate the effects of the Fund’s leverage due to borrowings on corresponding Share total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in the Fund’s portfolio) of -10%, -5%, 0%, 5%, and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below.

 

Assumed Return on Portfolio (Net of Expenses)			(10.00	)%			(5.00	)%			0.00	%			5.00	%			10.00	%
Corresponding Share Total Return			(12.69	)%			(6.67	)%			(0.65	)%			5.37	%			11.39	%

Corresponding Share Total Return is composed of two elements – the Share dividends paid by the Fund (the amount of which is largely determined by the net investment income of the Fund after paying interest expenses on the Fund’s borrowings) and gains or losses on the value of the securities the Fund owns.

ESG Integration

. The Adviser integrates material environmental, social and governance (“ESG”) considerations into its research and investment analysis with the goal of maximizing return and managing risk within the Fund’s investment objective and strategies. The Adviser analyzes issuer practices to identify potentially material ESG factors, which may include environmental impact, governance practices, and ethical business practices. ESG considerations may not be applicable to all types of instruments or investments in the Fund’s portfolio, and the weight given to ESG factors in any particular investment decision will vary.

 

30

ESG considerations are one input among many in the Adviser’s investment process and do not constitute a binding constraint on the Fund’s investments. The Fund does not operate as an

ESG-focused

or sustainable investment fund, and the Adviser does not represent that all of the Fund’s investments will satisfy any particular ESG standard or criteria.

Expedited Transactions Risk.

Investment analyses and investment decisions may be undertaken on an expedited basis in order for the Fund to take advantage of available investment opportunities. In such cases, the information available at the time of an investment decision may be limited, and the Adviser may not have access to the detailed information necessary for a thorough evaluation of the investment opportunity. Further, the Adviser may conduct its due diligence activities over a very brief period.

Hedging Transactions Risk.

The Fund may utilize investments for risk management purposes in order to: (i) protect against possible changes in the market value of the Fund’s investment portfolio resulting from fluctuations in the markets and changes in interest rates; (ii) protect the Fund’s unrealized gains in the value of its investment portfolio; (iii) facilitate the sale of any investments; (iv) enhance or preserve returns, spreads or gains on any investment in the Fund’s portfolio; (v) hedge against a directional trade; (vi) hedge the interest rate, credit or currency exchange rate on any of the Fund’s investments; (vii) protect against any increase in the price of any investments the Fund anticipates purchasing at a later date; or (viii) act for any other reason that the Adviser deems appropriate. The Fund will not be required to hedge any particular risk in connection with a particular transaction or its portfolio generally. The Adviser may be unable to anticipate the occurrence of a particular risk and, therefore, may be unable to attempt to hedge against it. While the Fund may enter into hedging transactions to seek to reduce risk, such transactions may result in a poorer overall performance for the Fund than if it had not engaged in any such hedging transaction. Moreover, the portfolio will always be exposed to certain risks that cannot be hedged.

Lack of Diversification of the Fund’s Overall Portfolio Risk.

The Fund’s portfolio could become significantly focused in any one issuer, industry, sector, strategy, country or geographic region, subject to the limits set forth in this prospectus. The likelihood that the Fund’s portfolio will be focused will be higher during the initial

ramp-up

and launch of the Fund. In addition, it is possible that the Adviser may select investments that are concentrated in a limited number or types of investments. There is no assurance as to the degree of diversification that will actually be achieved in the Fund’s investments either by geographic region or asset type. The Fund may make investments assuming contemplated sales that do not actually occur as expected, which could lead to increased risk as a result of the Fund’s having an unintended longer term investment and reduced diversification. This limited diversification may result in the concentration of risk, which, in turn, could expose the Fund to losses disproportionate to market movements in general if there are disproportionately greater adverse price movements in such investments.

Risk of Loss.

No guarantee or representation is made that the Fund’s investment program, including, without limitation, the Fund’s investment objective, diversification strategies or risk monitoring goals, will be successful. Investment results may vary substantially over time. No assurance can be made that profits will be achieved or that substantial or complete losses will not be incurred. Past investment results of the Adviser (or investments otherwise made by the Adviser’s investment professionals) are not necessarily indicative of their future performance.

Risks Related to Specific Investments

Directly Sourced Municipal Bond Investments. Municipal bond issuers may experience financial distress as a result of adverse economic conditions, reduced tax receipts, political developments, changes in law, or unsustainable debt burdens. Bonds backed by specific revenue streams are subject to the continued availability and sufficiency of those revenues, which may be volatile, cyclical, or subject to third-party actions. There can be no assurance that an issuer will be able to meet its payment obligations in full or on a timely basis. Directly sourced municipal bonds may be highly illiquid. There may be limited or no established secondary market for

 

31

such investments, and the Fund may be unable to liquidate a position when desired or required, or may be forced to do so at a substantial discount. Illiquidity may be exacerbated during periods of market stress or downturns, potentially impairing the Fund’s ability to meet redemption requests or rebalance its portfolio. If the Fund sources investments directly, it may hold a concentrated portfolio with exposure to a limited number of issuers, obligors, geographic regions, industries, or revenue sources. Adverse developments affecting a particular issuer, project, or region may have a disproportionate impact on the Fund compared to a more diversified strategy. In addition, where the Fund participates in a directly sourced transaction with the expectation of syndicating a portion of its position to other investors, there can be no assurance that such syndication will be completed to the extent anticipated or at all. If the Fund is unable to syndicate a position as planned, it may be required to hold a larger exposure to a single issuer or transaction than originally intended, which could result in increased concentration risk and potential losses disproportionate to those that would be experienced in a more diversified portfolio. In addition, municipal bonds differ widely in their legal structure, security arrangements, priority of payment, covenants, reserve requirements, and remedies upon default. Bondholder rights may be limited by state or local law, and enforcement of such rights may be costly, uncertain, delayed, or ineffective. Bankruptcy or insolvency proceedings involving municipal issuers are complex and may materially impair recoveries. Many directly sourced municipal bonds do not trade regularly, and reliable market quotations may be unavailable. As a result, the Fund may value certain investments using models, estimates, or third-party pricing services. Such valuations may not accurately reflect the price at which the investment could be sold and may fluctuate significantly over short periods of time. Direct sourcing requires extensive credit analysis, legal structuring, documentation review, and ongoing monitoring. The Fund’s due diligence process may fail to identify material risks, deficiencies, or weaknesses in an investment. In addition, operational errors, documentation defects, or failures by service providers could result in losses to the Fund.

Municipal Securities.

The two principal classifications of municipal securities are bonds and notes. Municipal bonds are intended to meet longer-term capital needs while municipal notes are intended to fulfill short-term capital needs. Municipal notes generally have original maturities not exceeding one year. Municipal notes include tax anticipation notes, revenue anticipation notes, bond anticipation notes, variable-rate demand obligations, and

tax-exempt

commercial paper.

Municipal bonds are typically classified as “general obligation” or “revenue” or “special obligation” bonds. General obligation bonds are secured by the issuer’s pledge of its full faith, credit, and taxing power for the payment of principal and interest. Revenue or special obligation bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other tax, but not from general tax revenues. The Fund may invest without limit in revenue bonds, which generally do not have the pledge of the credit of the issuer. The payment of the principal and interest on revenue bonds is dependent solely on the ability of the user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property financed as security for such payment. The Fund may invest without limit its total assets in securities or obligations that are related in such a way that business or political developments or changes affecting one such security could also affect the others (for example, securities with interest that is paid from projects of a similar type).

The Fund may invest in municipal lease obligations. A municipal lease obligation is not backed by the full faith and credit of the issuing municipality, but is usually backed by the municipality’s pledge to make annual appropriations for lease payments. Thus, it is possible that a municipality will not appropriate money for lease payments. Additionally, some municipal lease obligations may allow for lease cancellation prior to the maturity date of the security. Municipal lease obligations may be less readily marketable than other municipal securities and some may be illiquid.

Current federal tax law distinguishes between municipal securities issued to finance certain private activities (“private activity bonds”) and other municipal securities. Private activity bonds, most of which are

AMT-Subject

bonds and are also revenue bonds, include bonds issued to finance such projects as airports, housing projects, resource recovery programs, solid waste disposal facilities, and student loan programs. Bonds of certain sectors

 

32

have special risks. For example, the healthcare industry can be affected by federal or state legislation, electric utilities are subject to governmental regulation, and private-activity bonds are not government-backed. Attempts to restructure the tax system may have adverse effects on the value of municipal securities or make them less attractive to investors relative to taxable treatments.

The high

tax-free

yields sought by the Fund are generally obtainable from medium-quality municipal securities rated A or Baa by Moody’s Ratings (“Moody’s”), or A or BBB by S&P Global Ratings (“S&P”) or Fitch Ratings (“Fitch”), or equivalent ratings by any other nationally recognized statistical rating organization (“NRSRO”). It is expected that normally the Fund may retain a municipal security downgraded below C by Moody’s or CCC by S&P or Fitch, or equivalent ratings by any other NRSRO, an unrated municipal security determined by the Adviser to have undergone similar credit quality deterioration, or a defaulted municipal security. The Adviser may, however, choose to retain such a security if it determines that doing so is in the best interests of the Fund and its shareholders.

Risks of Debt Securities Generally.

Debt securities of all types of issuers may have speculative characteristics, regardless of whether they are rated. The issuers of such instruments (including municipal issuers) may face significant ongoing uncertainties and exposure to adverse conditions that may undermine the issuer’s ability to make timely payment of interest and principal in accordance with the terms of the obligations.

Interest Rate Risk.

Changes in interest rates can affect the value of the Fund’s investments in fixed-income instruments. The Fund may experience increased interest rate risk to the extent it invests, if at all, in debt instruments with longer maturities, debt instruments paying no interest (such as

zero-coupon

debt instruments) or debt instruments paying

non-cash

interest in the form of other debt instruments.

Variable and Floating Rate Securities Risk

. The Fund may invest in variable and floating rate municipal securities and other variable or floating rate debt instruments. The interest rates on such securities reset periodically based on a reference rate or index, which may cause the income generated by such securities to fluctuate. In a declining interest rate environment, the income generated by variable and floating rate securities will generally decrease, which may adversely affect the Fund’s distributions to shareholders. Conversely, in a rising interest rate environment, while the income generated by such securities may increase, the market value of such securities may decline if the applicable reference rate does not adjust sufficiently or promptly to reflect prevailing market conditions. Variable and floating rate securities may also be subject to increased credit risk if the issuer’s financial condition deteriorates as a result of higher debt service costs associated with rising rates. In addition, certain variable and floating rate securities may have interest rate floors below which the interest rate will not fall even if prevailing market rates decline below such floor, which may limit the Fund’s ability to benefit from declining rates. There can be no assurance that the reference rates applicable to variable and floating rate securities held by the Fund will accurately reflect prevailing market conditions or that such securities will perform as anticipated.

Duration Risk

. Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to the full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.

Municipal Market Risk

. Special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Fund’s investments in municipal securities. These factors include economic conditions, political or legislative changes, public health crises, uncertainties related to the tax status of municipal securities, and the rights of investors in these securities. To the extent that the Fund invests more of its assets in the municipal securities of a particular state or territory, the Fund may be vulnerable to events adversely affecting that state or territory, including economic, political and regulatory occurrences, court decisions, terrorism, public health crises (including the occurrence of a contagious disease or illness) and catastrophic natural disasters, such as hurricanes, fires or earthquakes. The Fund’s investments in certain municipal securities

 

33

with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.

In addition, changes in tax rates or the treatment of income from certain types of municipal securities, among other things, could negatively affect the municipal securities markets.

The municipal securities issued by Puerto Rico and its government agencies and municipalities may have more risks than those of other U.S. issuers of municipal securities. Puerto Rico continues to face a challenging economic and fiscal environment. If the general economic situation in Puerto Rico persists or worsens, the volatility and credit quality of Puerto Rican municipal securities could continue to be adversely affected, and the market for such securities may deteriorate further.

Municipal Bond Tax Risk

. From time to time, the U.S. Government and Congress consider changes in federal tax law that could limit or eliminate the federal tax exemption for municipal bond income, which would in effect reduce the income received by shareholders from the Fund by increasing taxes on that income. In such event, the Fund’s net asset value could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable taxable bonds. Actions or anticipated actions affecting the

tax-exempt

status of municipal bonds could also result in significant repurchase requests as investors anticipate adverse effects on the Fund or seek higher yields to offset the potential loss of the tax exemption. Any such changes could have a material adverse effect on the Fund and its shareholders.

Inflation Risk

. The value of assets or income from investments may be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.

Prepayment Risk.

The frequency at which prepayments (including voluntary prepayments by the obligors and accelerations due to defaults) occur on debt instruments will be affected by a variety of factors including the prevailing level of interest rates and spreads as well as economic, demographic, tax, social, legal and other factors. Generally, obligors tend to prepay their fixed rate obligations when prevailing interest rates fall below the coupon rates on their obligations. Similarly, floating rate issuers and borrowers tend to prepay their obligations when spreads narrow.

In general, “premium” securities (securities whose market values exceed their principal or par amounts) are adversely affected by faster than anticipated prepayments, and “discount” securities (securities whose principal or par amounts exceed their market values) are adversely affected by slower than anticipated prepayments. Since many fixed rate obligations will be discount instruments when interest rates and/or spreads are high, and will be premium instruments when interest rates and/or spreads are low, such debt instruments may be adversely affected by changes in prepayments in any interest rate environment.

However, increased prepayment levels may negatively impact the total cash realized over the life of the assets and may consequently affect the rate of return on such investments. Specifically, adverse effects of prepayments may impact the Fund’s portfolio in two ways. First, particular investments may experience outright losses, as in the case of an interest-only instrument in an environment of faster actual or anticipated prepayments. Second, particular investments may underperform relative to hedges that the Adviser may have constructed for these investments, resulting in a loss to the Fund’s overall portfolio. In particular, prepayments (at par) may limit the potential upside of many instruments to their principal or par amounts, whereas their corresponding hedges often have the potential for unlimited loss. The Adviser accounts for anticipated prepayment levels in investing in loan assets.

 

34

Zero-Coupon Securities Risk

. Zero-coupon securities are debt securities that have been issued without interest coupons or stripped of their unmatured interest coupons, and include receipts or certificates representing interests in such stripped debt obligations and coupons. Such a security pays no interest to its holder during its life. Its value to an investor consists of the difference between its face value at the time of maturity and the price for which it was acquired, which is generally an amount significantly less than its face value. Such securities usually trade at a deep discount from their face or par value and are subject to greater fluctuations in market value in response to changing interest rates than debt obligations of comparable maturities and credit quality that make current distributions of interest. On the other hand, because there are no periodic interest payments to be reinvested prior to maturity, these securities eliminate reinvestment risk and “lock in” a rate of return to maturity.

High-Yield Securities Risk.

A portion of the Fund’s investments may consist of investments characterized as “high-yield securities”. Such securities are expected to be rated below investment-grade by one or more nationally recognized statistical rating organizations or will be unrated but of comparable credit quality to obligations rated below investment-grade, and have greater credit risk and liquidity risk than more highly rated obligations. Bonds or other fixed-income securities that are “higher yielding” (including

non-investment

grade) debt securities are generally not exchange traded and, as a result, these securities trade in the

over-the-counter

marketplace, which is less transparent and has wider bid/ask spreads than the exchange-traded marketplace. High-yield securities face ongoing uncertainties and exposure to adverse business, financial or economic conditions which could lead to the issuer’s inability to meet timely interest and principal payments. High-yield securities are generally more volatile and are generally unsecured and may be subordinate to other obligations of the obligor, which may be secured by substantially all of the issuer’s assets. High-yield securities may also not be protected by financial covenants or limitations on additional indebtedness. The market values of certain of these lower-rated and unrated debt securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities which react primarily to fluctuations in the general level of interest rates, and tend to be more sensitive to economic conditions than are higher-rated securities. Companies that issue such securities may be highly leveraged and their relatively high debt to equity ratios create increased risks that their operations might not generate sufficient cash flows to service their obligations. Overall declines in the below investment grade bond and other markets or an economic downturn in the financial markets generally may adversely affect such issuers by inhibiting their ability to refinance their obligations at maturity. In addition, the Fund may invest in bonds of issuers that do not have publicly traded equity securities, making it more difficult to hedge the risks associated with such investments.

The Fund is authorized to invest in obligations of issuers that are generally trading at significantly higher yields than had been historically typical of the applicable issuer’s obligations. Such investments may include debt obligations that have a heightened probability of being in covenant or payment default in the future or that are currently in default and are generally considered speculative. The repayment of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer might not make any interest or other payments. Typically, such workout or bankruptcy proceedings result only in partial recovery of cash payments or an exchange of the defaulted security for other debt or equity securities of the issuer or its affiliates, which may in turn be illiquid or speculative.

Corporate Debt Risk.

Bonds, notes and debentures issued by corporations may pay fixed, variable or floating rates of interest, and may include

zero-coupon

obligations. Corporate debt instruments may be subject to credit ratings downgrades. Other instruments may have the lowest quality ratings or may be unrated. In addition, the Fund may be paid interest in kind in connection with its investments in corporate debt and related investments (e.g., the principal owed to the Fund in connection with a debt investment may be increased by the amount of interest due on such debt investment). Such investments may experience greater market value volatility than debt obligations that provide for regular payments of interest in cash and, in the event of a default, the Fund may experience substantial losses.

Mezzanine Debt Risk.

Mezzanine debt is typically junior to the obligations of a company to senior creditors, trade creditors and employees. The ability of the Fund to influence a company’s affairs, especially during periods

 

35

of financial distress or following an insolvency, may be less than that of senior creditors. Mezzanine debt instruments are often issued in connection with leveraged acquisitions or recapitalizations in which the issuers incur a substantially higher amount of indebtedness than the level at which they had previously operated. Default rates for mezzanine debt instruments have historically been higher, and recovery rates lower, than for investment-grade instruments and other debt instruments. In the event of the insolvency of a portfolio company of the Fund or similar event, the Fund’s debt investment therein will be subject to fraudulent conveyance, subordination and preference laws.

Stressed Debt Risk.

Stressed issuers are issuers that are not yet deemed distressed or bankrupt and whose debt securities are trading at a discount to par, but not yet at distressed levels. An example would be an issuer that is in technical default of its credit agreement, or undergoing strategic or operational changes, which results in market pricing uncertainty. The market prices of stressed and distressed instruments are highly volatile, and the spread between the bid and the ask prices of such instruments is often unusually wide.

Non-Performing

Nature of Debt Risk.

Certain debt instruments may be

non-

performing or in default. Furthermore, the obligor or relevant guarantor may also be in bankruptcy or liquidation. There can be no assurance as to the amount and timing of payments, if any, with respect to such debt instruments.

Troubled Origination Risk.

When financial institutions or other entities that are insolvent or in serious financial difficulty originate debt, the standards by which such instruments were originated, the recourse to the selling institution, or the standards by which such instruments are being serviced or operated may be adversely affected.

Equitable Subordination Risk.

Under common law principles that in some cases form the basis for lender liability claims, if a lender (i) intentionally takes an action that results in the undercapitalization of a borrower or issuer to the detriment of other creditors of such borrower or issuer, (ii) engages in other inequitable conduct to the detriment of such other creditors, (iii) engages in fraud with respect to, or makes misrepresentations to, such other creditors or (iv) uses its influence as a stockholder to dominate or control a borrower or issuer to the detriment of other creditors of such borrower or issuer, a court may elect to subordinate the claim of the offending lender or bondholder to the claims of the disadvantaged creditor or creditors (a remedy called “equitable subordination”). If the Fund engages in such conduct, the Fund may be subject to claims from creditors of an obligor that debt held by the Fund should be equitably subordinated. The Fund does not intend to engage in conduct that would form the basis for a successful cause of action based upon the lender liability or equitable subordination doctrines; however, because of the nature of the debt obligations, the Fund may be subject to claims from creditors of an obligor that debt obligations of such obligor which are held by the issuer should be equitably subordinated.

Credit Risk

.

While loans and most other assets invested in by the Fund may be collateralized, the Fund may be exposed to losses resulting from default. Therefore, the value of the underlying collateral, the creditworthiness of the borrower or other counterparty and the priority of the lien are each of great importance. The Fund cannot guarantee the adequacy of the protection of the Fund’s interests, including the validity or enforceability of the applicable investment contract and the maintenance of the anticipated priority and perfection of the applicable security interests. Furthermore, the Fund cannot assure that claims may not be asserted that might interfere with enforcement of the Fund’s rights. In the event of a foreclosure, the Fund or affiliate of the Fund may assume direct ownership of the underlying asset. The liquidation proceeds upon sale of such asset may not satisfy the entire outstanding balance of principal and interest payable, resulting in a loss to the Fund. Any costs or delays involved in the effectuation of a foreclosure of the asset or a liquidation of the underlying property will further reduce the proceeds and thus increase the loss.

Tax Risk

. There is no guarantee that the income on the Fund’s municipal securities will be exempt from regular U.S. federal, and if applicable, state income taxes. From time to time, the U.S. Government and the U.S. Congress consider changes in U.S. federal income tax law that could limit or eliminate the federal tax exemption

 

36

for municipal bond income, which would in effect reduce the income received by shareholders from the Fund by increasing taxes on that income. In such event, the Fund’s net asset value (“NAV”) could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable taxable bonds. Actions or anticipated actions affecting the tax-exempt status of municipal bonds could also result in significant shareholder redemptions of Fund shares as investors anticipate adverse effects on the Fund or seek higher yields to offset the potential loss of the tax deduction. As a result, the Fund would be required to maintain higher levels of cash to meet the redemptions, which would negatively affect the Fund’s yield.

Alternative Minimum Tax Risk

. Under current U.S. federal income tax law, interest on

tax-exempt

municipal securities issued after August 7, 1986 which are “specified private activity bonds,” and the proportionate share of any exempt-interest dividend paid by a regulated investment company that receives interest from such specified private activity bonds, will be treated as an item of tax preference for purposes of the AMT imposed on individuals, though for regular federal income tax purposes such interest will remain fully

tax-exempt.

Such private activity bonds

(“AMT-Subject

Bonds”), which include industrial development bonds and bonds issued to finance such projects as airports, housing projects, solid waste disposal facilities, student loan programs and water and sewage projects, have provided, and may continue to provide, somewhat higher yields than other comparable municipal securities. In most instances, no state, municipality or other governmental unit with taxing power will be obligated with respect to

AMT-Subject

Bonds, and payment of principal and interest generally depends solely on the ability of the user of the facilities financed by the bonds to meet its financial obligations and any pledge of real and personal property so financed as security for payment.

Illiquid Investments Risk.

Certain investments may be illiquid because, for example, they are subject to legal or other restrictions on transfer or there is no liquid market for such investments. Valuation of such investments may be difficult or uncertain because there may be limited information available about the issuers of such investments. The market prices, if any, for such investments tend to be volatile and may not be readily ascertainable, and the Fund may not be able to sell them when it desires to do so or to realize what it perceives to be their fair value in the event of a sale. The sale of restricted and illiquid investments often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of investments eligible for trading on national securities exchanges or in the

over-the-counter

markets. The Fund may not be able to readily dispose of such illiquid investments and, in some cases, may be contractually prohibited from disposing of such investments for a specified period of time. As a result, the Fund may be required to hold such investments despite adverse price movements. Even those markets which the Adviser expects to be liquid can experience periods, possibly extended periods, of illiquidity. Occasions have arisen in the past where previously liquid investments have rapidly become illiquid.

A portion of the Fund’s investments may consist of securities that are subject to restrictions on resale by the Fund for various reasons including that they were acquired in a “private placement” transaction or that the Fund is deemed to be an affiliate of the issuer of such securities. Generally, the Fund may be able to sell such securities without restriction to other large institutional investors but may be restrained in its ability to sell them to other investors. If restricted securities are sold to the public, the Fund may be deemed to be an underwriter or possibly a controlling person with respect thereto for the purposes of the Securities Act and be subject to liability as such under the Securities Act.

Some of the Fund’s interests may be highly illiquid and may be subject to long term holding in accordance with the investment program of the Fund and due to market conditions applicable to such assets.

Bankruptcy Claims Risk.

Obligations of issuers of municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the United States Bankruptcy Code (the “Bankruptcy Code”). In addition, the obligations of such issuers may become subject to laws enacted in the future by Congress, state legislatures, or referenda extending the time for payment of principal and/or interest, or imposing other constraints upon enforcement of such obligations or upon the ability

 

37

The Portfolio Managers

Unless otherwise indicated, the information below is provided as of the date of this prospectus.

 

Compensation

The Adviser’s compensation program for portfolio managers is designed to align with clients’ interests, emphasizing each portfolio manager’s ability to generate long-term investment success for the Adviser’s clients, including the Fund. The Adviser also strives to ensure that compensation is competitive and effective in attracting and retaining the highest caliber employees.

Portfolio managers receive a base salary, incentive compensation and contributions to AllianceBernstein’s 401(k) plan. Part of the annual incentive compensation is generally paid in the form of a cash bonus, and part through an award under the firm’s Incentive Compensation Award Plan (ICAP). The ICAP awards vest over a three-year period. Deferred awards are paid in the form of restricted grants of the firm’s Master Limited Partnership Units, and award recipients have the ability to receive a portion of their awards in deferred cash. The amount of contributions to the 401(k) plan is determined at the sole discretion of the Adviser. On an annual basis, the Adviser endeavors to combine all of the foregoing elements into a total compensation package that considers industry compensation trends and is designed to retain its best talent. The incentive portion of total compensation is determined by quantitative and qualitative factors. Quantitative factors, which are weighted more heavily, are driven by investment performance. Qualitative factors are driven by contributions to the investment process and client success.

one-,

Among the qualitative components considered, the most important include thought leadership, collaboration with other investment colleagues, contributions to risk-adjusted returns of other portfolios in the firm, efforts in mentoring and building a strong talent pool and being a good corporate citizen. Other factors can play a role in determining portfolio managers’ compensation, such as the complexity of investment strategies managed, volume of assets managed and experience.

The Adviser emphasizes four behavioral competencies—relentlessness, ingenuity, team orientation and accountability—that support its mission to be the most trusted advisor to its clients. Assessments of investment

 

69

professionals are formalized in a review process that includes feedback from other professionals from across the investment teams and the Adviser.

Conflicts of Interest

As an investment adviser and fiduciary, the Adviser owes its clients and shareholders an undivided duty of loyalty. The Adviser recognizes that conflicts of interest are inherent in its business and accordingly has developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of employee personal trading, managing multiple accounts for multiple clients, including other registered investment companies, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the above-mentioned policies and oversight monitoring to ensure that all clients are treated equitably. The Adviser places the interests of its clients first and expects all of its employees to meet their fiduciary duties.

open-end

60-day

 

70

within its portfolio management teams and investment opportunities are allocated equitably among different clients, subject to the exceptions noted below. Nevertheless, access to portfolio funds or other investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons. Additional information about the Adviser’s policy relating to the allocation of investment opportunities may be found in the Adviser’s Form ADV, which is updated from time to time.

closed-end

co-investments

co-invest

co-investments

co-investments

Other Accounts Managed

The Portfolio Managers are primarily responsible for the portfolio management of the Fund and the other funds and accounts shown in the table below. The following table provides information regarding other registered investment companies, other pooled investment vehicles and other accounts over which the Portfolio Managers also have management responsibilities. The table provides the number of such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of August 31, 2026 (and does not include the Fund).

 

Beneficial Ownership of Securities.

The dollar range of the Fund’s equity securities owned directly or beneficially by the Fund’s portfolio managers as of August 31, 2026, unless otherwise noted, is set forth below:

 

 

71

ADMINISTRATOR

AllianceBernstein, L.P. serves as the administrator to the Fund (in such capacity, the “Administrator”) pursuant to an administration agreement between the Fund and the Administrator (the “Administration Agreement”). The Administrator provides, or arranges for the provision of, the administrative services necessary for the operations of the Fund. In accordance with the Administration Agreement, the Fund has agreed to reimburse the Administrator for the costs and expenses incurred by the Administrator in performing its obligations under the Administration Agreement, except as otherwise provided in the Administration Agreement and/or in the Advisory Agreement, including rent, fees and expenses associated with performing administrative functions, and the Fund’s allocable portion of the costs of compensation, benefits and related expenses of the Adviser’s Chief Financial Officer, Chief Compliance Officer, and any administrative support staff.

The Administrator may provide such administrative services directly or engage one or more third-party administrators to provide such administrative services to the Fund on its behalf, as the Administrator determines necessary to fulfill its responsibilities, subject to the oversight of the Board, with the scope of such services and oversight to be set forth in each sub-administration agreement. The Administrator has engaged State Street Bank and Trust Company as sub-administrator (the “Sub-Administrator”) pursuant to a sub-administration agreement entered into between the Administrator and the Sub-Administrator (the “Sub-Administration Agreement”). The Administrator pays the Sub-Administrator for all services received under the Sub-Administration Agreement.

TRANSFER AGENT AND CUSTODIAN

The Fund has entered into a transfer agency agreement with AllianceBernstein Investor Services, Inc. (the “Transfer Agent”), under which the Transfer Agent provides the Fund with transfer agency services. The Transfer Agent’s principal place of business is located at P.O. Box 786003, San Antonio, Texas 78278-6003. For providing transfer agency, dividend disbursing agency, repurchase offer agency and shareholder servicing support to the Fund, the Fund pays the Transfer Agent a transfer agency fee payable monthly based on the number of accounts administered, the types of accounts administered and the amount of assets held in such accounts.

The Fund has also entered into a custody agreement with State Street Bank and Trust Company (the “Custodian”) under which the Custodian provides the Fund with custodian services. The Custodian’s principal place of business is located at 1 Congress Street, Boston, MA 02114-2016.

sub-transfer

sub-transfer

DISTRIBUTOR

The Fund has entered into a distribution agreement with AllianceBernstein Investments, Inc., an affiliate of the Adviser (the “Distributor”), which serves as the Fund’s principal underwriter and acts as distributor and placement agent of the Fund’s Shares on a best efforts basis, subject to various conditions.

 

72

FUND EXPENSES

Pursuant to the Advisory Agreement, the investment team of the Adviser, together with its staff, when and to the extent engaged in providing investment advisory and management services, and the compensation and related expenses and routine overhead expenses of such personnel allocable to such services, will be provided for and paid for by the Adviser.

Other than such expenses that are expressly borne by the Adviser pursuant to the Advisory Agreement or the Administrator pursuant to the Administration Agreement, the Fund will bear all other costs and expenses of its operations and transactions, including, without limitation: (i) the cost of the Fund’s organization and any offerings; (ii) the cost of calculating the Fund’s net asset value, including the cost of any third-party valuation services; (iii) the cost of effecting sales and repurchases of the Fund’s shares and other securities, including, without limitation, as provided for under the Fund’s program to conduct periodic repurchase offers; (iv) interest payable on debt, if any, to finance the Fund’s investments; (v) investment advisory fees, including management fees and incentive fees (as applicable), to the Adviser, pursuant to the Advisory Agreement; (vi) fees payable to third parties relating to, or associated with, making investments, including legal fees and expenses and fees and expenses associated with performing due diligence reviews of prospective investments and advisory fees as well as expenses associated with such activities (including travel-related expenses (including in connection with potential investment and trading activity and which may include first-class travel)); (vii) broken deal expenses; (viii) expenses of consultants, paying agents, registrars, servicers, financial advisors, investment bankers; (ix) fees and expenses relating to data and pricing services (e.g., Bloomberg); (x) trading order management systems (e.g., Everest and Efront) whose primary purpose is to support the Fund’s trading activities and related record keeping as well as the expenses of any subsidiary or special purpose vehicle in which the Fund invests; (xi) the costs associated with protecting the Fund’s interests in its investments, including legal fees; (xii) transfer agent and custodial fees; (xiii) fees and expenses associated with marketing and investor relations efforts (including attendance at investment conferences and similar events); (xiv) federal and state registration fees; (xv) any exchange listing fees; (xvi) U.S. federal, state, and local and taxes; (xvii) Independent Trustees’ fees and expenses (including travel and other costs associated with the performance of Independent Trustees’ responsibilities); (xviii) brokerage commissions; (xix) costs of proxy statements, shareholders’ reports and notices; (xx) costs of preparing government filings, including periodic and current reports with the SEC; (xxi) fidelity bond, liability insurance and other insurance premiums; (xxii) direct costs and expenses of administration, including printing, mailing, long distance telephone and staff; (xxiii) fees and expenses associated with independent audits and outside legal costs; (xxiv) costs associated with the Fund’s reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws and any fees (including licensing fees) and expenses relating to the Fund’s adherence with rules of any self-regulatory organization or applicable law in connection with the Fund’s activities; (xxv) all other fees and expenses payable to third parties that the Adviser or Administrator retain to provide administrative services to the Fund, including, but not limited to, any or compliance providers; (xxvi) document storage and obligation tracking systems; and (xxvii) all other expenses incurred by the Adviser or by the Administrator in connection with administering the Fund’s business, including payments made under the Advisory Agreement based upon the Fund’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to the Fund under the Advisory Agreement, including rent, the fees and expenses associated with performing administrative functions, and the Fund’s allocable portion of the costs of compensation, benefits and related expenses of the Adviser’s Chief Financial Officer, Chief Compliance Officer, and any administrative support staff, including accounting personnel, legal personnel who assist with the Fund’s investment or trading activity, tax personnel, preparation and distribution of annual reports (including Form notices, statements and other communications to investors, the cost and expenses relating to accounting and legal personnel who assist with internal asset management and oversight, monitoring of third-party service providers, cash management services that are administrative in nature, fund accounting and computer hardware and software.

 

73

Expense Limitation Arrangement

The Adviser has contractually agreed to cause the aggregate operating expenses incurred by the Fund, including organizational and offering expenses, excluding (i) fees and expenses of acquired funds (other than investment advisory fees of acquired funds for which the Adviser serves as investment adviser); (ii) interest expense, financing and borrowing costs, and any other related expenses for borrowings; (iii) taxes; (iv) expenses related to portfolio transactions and other investment-related costs (including brokerage commissions, dealer and underwriter spreads, and prime brokerage fees and expenses); and (v) extraordinary expenses, including expenses related to litigation, to be limited to 1.00% and 0.25% of average daily net assets for Class A Shares and Advisor Class Shares, respectively, in each case on an annualized basis (the “Operating Expense Limitation”). To determine the amount of expenses in excess of the Operating Expense Limitation, the amount of allowable fiscal-year-to-date expenses is computed daily by prorating based on the number of days elapsed within the fiscal year of the Fund (the “Prorated Limitation”). The Prorated Limitation will be compared to the expenses of the Fund recorded through the current day in order to produce the allowable expenses to be recorded and accrued for the Fund’s current day (the “Allowable Expenses”). If the expenses of the Fund for the current day exceed the Allowable Expenses, the Adviser will be responsible for such excess and will for the current day (i) reduce the Adviser’s advisory fees and/or (ii) reimburse the Fund accordingly. The Expense Limitation Agreement will remain in effect for a period of one-year from the effective date of this Registration Statement and will terminate automatically upon the expiration of the Term, unless renewed by the Adviser, subject to Board approval thereof. The Expense Limitation Agreement may be terminated at any time, and without payment of any penalty, by the Board upon sixty (60) days’ written notice to the Adviser. The Adviser may not terminate the Expense Limitation Agreement unless the Adviser provides the Fund with at least sixty (60) days’ notice. The Adviser may receive reimbursement of any fees waived or reimbursements made to the Fund pursuant to the Expense Limitation Agreement; provided, however, that only fees waived or reimbursements made to the Fund during the 12-month period from the effective date of this Registration Statement (the “Eligible Period”) shall be eligible for recoupment, and any such recoupment must be made within three years of the date on which the Fund incurred the expense. The Adviser may seek recoupment of Eligible Period expenses only if such recoupment can be achieved within the operating expense limitation in effect at the time of the waiver or the operating expense limitation in effect at the time of recoupment, whichever is lower, and such repayment has been approved by the Board.

Organizational and Offering Costs

Organizational costs include, among other things, the cost of organizing as a Delaware statutory trust, including the cost of legal services and other fees pertaining to the Fund’s organization. The Fund’s initial offering costs include, among other things, legal, accounting, printing and other expenses pertaining to this offering.

Pursuant to the Expense Limitation Agreement, to the extent the Fund’s aggregate operating expenses (as defined therein) would otherwise exceed the Operating Expense Limitation, the Adviser will reduce its advisory fees and/or reimburse the Fund for such excess. The Adviser may receive reimbursement of any fees waived or reimbursements made to the Fund pursuant to the Expense Limitation Agreement within three years of such payment, if such reimbursement can be achieved within the Operating Expense Limitation or that was in effect at the time of the waiver, whichever is lower, and such repayment has been approved by the Board; provided, however, that only fees waived or reimbursements made to the Fund during the 12-month period from the effective date of this Registration Statement are be eligible for recoupment.

PLAN OF DISTRIBUTION

AllianceBernstein Investments, Inc., located at 501 Commerce Street, Nashville, TN 37203, serves as the Fund’s principal underwriter and acts as the Distributor of the Fund’s Shares on a best efforts basis, subject to

 

74

various conditions. The Fund currently offers two classes of shares although the Fund reserves the right, subject to applicable law, to offer additional classes of Shares. The Fund has been granted exemptive relief from the SEC to, among other things, issue multiple classes of Shares and to impose asset-based distribution fees and early-withdrawal fees as applicable. The Fund currently offers Class A and Advisor Shares and may in the future register and include other classes of Shares in the offering. The Fund’s Shares are offered for sale through the Distributor at NAV plus any applicable sales load. The Distributor also may enter into agreements with financial intermediaries for the sale and servicing of the Fund’s Shares and receipt of purchase orders and repurchase requests on its behalf. Such financial intermediaries are authorized to designate other intermediaries to receive purchase and repurchase orders on the Fund’s behalf. Please consult your financial firm for additional information. In reliance on Rule 415 of the Securities Act, the Fund intends to offer its Shares, on a continual basis, through the Distributor. The Distributor is not required to sell any specific number or dollar amount of the Fund’s Shares but will use its best efforts to solicit orders for the purchase of the Shares. Shares of the Fund will not be listed on any national securities exchange and the Distributor will not act as a market marker in Fund Shares.

The following table describes the initial and subsequent minimum purchase amounts for each class of Shares, which are subject to waiver in certain circumstances.

 

The Fund reserves the right to waive investment minimums.

This section discusses how to buy different classes of shares of the Fund. The Fund offers two classes of shares.

(800) 221-5672.

To effect an order for the purchase of the Fund’s shares, the Fund must receive the order in “proper form.” Proper form generally means that your instructions:

 

 

75

 

Written instructions also must include:

 

 

The Fund reserves the right, without notice, to revise the requirements for proper form.

HOW TO BUY SHARES

The purchase of the Fund’s shares is priced at the next-determined NAV after your order is received in proper form.

Class A Shares – Shares Available to Retail Investors

You may purchase the Fund’s Class A Shares through financial intermediaries, such as broker-dealers or banks. These purchases may be subject to an initial sales charge, an asset-based sales charge or CDSC as described below.

 

 

Other Purchase Information

half-day

(800) 221-5672

Shares of the Funds are generally available for purchase in the United States, Puerto Rico, Guam, American Samoa and the U.S. Virgin Islands. Except to the extent otherwise permitted by the Fund, the Fund will only accept purchase orders directly from U.S. citizens with a U.S. address (including an APO or FPO address) or resident aliens with a U.S. address (including an APO or FPO address) and a U.S. taxpayer identification number

 

76

W-9

W-9

non-resident

non-U.S.

Tax-Deferred

tax-deferred

 

 

 

Class A Shares – Shares Available to Group Retirement Plans

non-qualified

Class A Shares are also available at NAV to the AllianceBernstein Link, AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans but only if such plans have at least $250,000 in plan assets or 100 employees, and to certain defined contribution retirement plans that do not have plan level or omnibus accounts on the books of the Fund.

Advisor Shares

You may purchase Advisor Shares through your financial advisor at NAV. Advisor Shares may be purchased and held solely:

 

 

 

 

Advisor Shares may also be available on brokerage platforms of firms that have agreements with the Distributor to offer such shares when acting solely on an agency basis for the purchase or sale of such shares. If you transact in Advisor Shares through one of these programs, you may be required to pay a commission and/or other forms of compensation to the broker. Shares of the Fund are available in other share classes that have different fees and expenses.

Required Information

The Fund is required by law to obtain, verify, and record certain personal information from you or persons authorized to act on your behalf in order to establish an account. Required information includes name, date of

 

77

birth, physical address and taxpayer identification number (for most investors, your social security number). The Fund may also ask to see other identifying documents. If you do not provide the information, the Fund will not be able to open your account. If the Fund is unable to verify your identity, or that of another person(s) authorized to act on your behalf, or, if the Fund believes it has identified potentially criminal activity, the Fund reserves the right to take action it deems appropriate or as required by law, which may include closing your account.

The Fund is required to withhold 24% of taxable dividends, capital gains distributions, and redemptions paid to any shareholder who has not provided the Fund with his or her correct taxpayer identification number. To avoid this, you must provide your correct taxpayer identification number on your Fund Application.

General

IRA custodians, plan sponsors, plan fiduciaries, plan recordkeepers, and other financial intermediaries may establish their own eligibility requirements as to the purchase, sale or exchange of Fund shares, including minimum and maximum investment requirements. The Fund is not responsible for, and has no control over, the decisions of any plan sponsor, fiduciary or other financial intermediary to impose such differing requirements.

The Distributor may refuse any order to purchase shares. The Fund reserves the right to suspend the sale of its shares to the public in response to conditions in the securities markets or for other reasons.

back-up

The amount of these fees for each class of the Fund’s Shares is:

 

Because these fees are paid out of the Fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales fees. Class A Shares will have a higher expense ratio, pay correspondingly lower dividends and may have a lower NAV (and returns) as compared to Advisor Shares. All or some of these fees are paid to financial intermediaries, which may include your financial intermediary’s firm. The Distributor retains these fees for certain shareholder accounts, including those held directly with the Fund (with no associated financial intermediary). 0.25% of such fee is a shareholder servicing fee and the remaining portion is a distribution fee.

PAYMENTS TO FINANCIAL ADVISORS AND THEIR FIRMS

Financial intermediaries market and sell shares of the Fund. These financial intermediaries employ financial advisors and receive compensation for selling shares of the Fund. This compensation is paid from various sources, including any sales charge, CDSC, and/or distribution and/or servicing fees that you or the Fund may pay. Your individual financial advisor may receive some or all of the amounts paid to the financial intermediary that employs him or her.

 

78

WHAT IS A FINANCIAL INTERMEDIARY?

A financial intermediary is a firm that receives compensation for selling shares of the Fund and/or provides services to the Fund’s shareholders. Financial intermediaries may include, among others, your broker, your financial planner or advisor, banks and insurance companies. Financial intermediaries may employ financial advisors who deal with you and other investors on an individual basis.

All or a portion of the initial sales charge that you pay is paid by the Distributor to financial intermediaries selling Class A Shares. The Distributor may also pay financial intermediaries a fee of up to 0.75% on purchases of Class A Shares that are sold without an initial sales charge.

For Class A Shares, up to 100% of the distribution and/or servicing fees applicable to these classes of shares each year may be paid to financial intermediaries.

Your financial advisor’s firm receives compensation from the Fund, the Distributor and/or the Adviser in several ways from various sources, which include some or all of the following:

 

 

 

 

 

Please read this Prospectus carefully for information on this compensation.

Other Payments for Distribution Services, Educational Support and shareholder Services

In addition to the commissions paid to or charged by financial intermediaries at the time of sale and distribution and/or servicing fees, some or all of which are paid to financial intermediaries (and, in turn, may be paid to your financial advisor), the Distributor, at its expense, currently provides additional payments to firms that sell shares of the Fund. Although the individual components may be higher and the total amount of payments made to each qualifying firm in any given year may vary, the total amount paid to a financial intermediary in connection with the sale of shares of the Fund and AB Mutual Funds will generally not exceed the sum of (a) 0.25% of the current year’s fund sales by that firm and (b) 0.10% of average daily net assets attributable to that firm over the year. These sums include payments for distribution analytical data regarding the Fund and AB Mutual Fund sales by financial advisors of these firms and to reimburse directly or indirectly the costs incurred by these firms and their employees in connection with educational seminars and training efforts about the Fund and the AB Mutual Funds for the firms’ employees and/or their clients and potential clients. The costs and expenses associated with these efforts may include travel, lodging, entertainment and meals. The Distributor may pay a portion of “ticket” or other transactional charges.

A number of factors are considered in determining the additional payments, including each firm’s Fund sales, assets and repurchase rates, and the willingness and ability of the firm to give the Distributor access to its financial advisors for educational and marketing purposes. In some cases, firms will include the Fund on a “preferred list”. The Distributor’s goal is to make the financial advisors who interact with current and prospective investors and shareholders more knowledgeable about the Fund so that they can provide suitable information and advice about the funds and related investor services.

The Fund, the Distributor, and the Transfer Agent also may make payments for recordkeeping and other transfer agency services to financial intermediaries that sell Fund shares. If paid by the Fund, these expenses will be included in “Other Expenses” under “Fees and Expenses of the Fund—Annual Fund Operating Expenses” in the Summary Information at the beginning of this Prospectus.

 

79

If one fund sponsor makes greater distribution assistance payments than another, your financial advisor and his or her firm may have an incentive to recommend one fund complex over another. Similarly, if your financial advisor or his or her firm receives more distribution assistance for one share class versus another, then they may have an incentive to recommend that class.

Please speak with your financial advisor to learn more about the total amounts paid to your financial advisor and his or her firm by the Fund, the Adviser, the Distributor and by sponsors of other funds he or she may recommend to you. You should also consult disclosures made by your financial advisor at the time of purchase.

Although the Fund may use brokers and dealers that sell shares of the Fund to effect portfolio transactions, the Fund does not consider the sale of Fund shares as a factor when selecting brokers or dealers to effect portfolio transactions.

Sales Charges

 

 

Except as noted below, purchases of Class A Shares in the amount of $250,000 or more; or by AllianceBernstein or sponsored group retirement plans are not subject to an initial sales charge, but may be subject to a 1.50% CDSC if repurchased or terminated within one year. The Distributor may pay a commission equal to 1.50% of the purchase amount to financial intermediaries for purchases of $250,000 or more.

 

 

80

 

 

front-end

HOW IS THE CDSC CALCULATED?

The CDSC is applied to the lesser of NAV at the time of repurchase or the original cost of shares being repurchased. This means that no sales charge is assessed on increases in NAV above the initial purchase price. Shares obtained from dividend or distribution reinvestment are not subject to the CDSC. In determining the CDSC, it will be assumed that the repurchase is, first, of any shares not subject to a CDSC and, second, of shares held the longest.

SALES CHARGE REDUCTION PROGRAMS FOR CLASS A SHARES

This section includes important information about sales charge reduction programs available to investors in Class A Shares and describes information or records you may need to provide to the Fund or your financial intermediary in order to be eligible for sales charge reduction programs.

Information about Quantity Discounts and sales charge reduction programs also is available free of charge and in a clear and prominent format on our website at http://www.abfunds.com/go/OppCredit then click on “Literature–Understanding Sales Charges & Expenses”.

Combined Purchase Privileges

A shareholder may qualify for a Quantity Discount by combining purchases of shares of the Fund into a single “purchase”. A “purchase” means a single purchase or concurrent purchases of shares of the Fund by:

 

 

 

 

81

Letter of Intent

An investor may not immediately invest a sufficient amount to reach a Quantity Discount, but may plan to make one or more additional investments over a period of time that, in the end, would qualify for a Quantity Discount. For these situations, the Fund offers a Letter of Intent, which permits new investors to express the intention, in writing, to invest at least $100,000 in Class A Shares of the Fund within 13 months. The Fund will then apply the Quantity Discount to each of the investor’s purchases of Class A Shares that would apply to the total amount stated in the Letter of Intent. In the event an existing investor chooses to initiate a Letter of Intent, the Fund will use the higher of cost or current NAV of the investor’s existing investments and of those accounts with which investments are combined via Combined Purchase Privileges toward the fulfillment of the Letter of Intent. For example, if the combined cost of purchases totaled $80,000 and the current NAV of all applicable accounts is $85,000 at the time a $100,000 Letter of Intent is initiated, the subsequent investment of an additional $15,000 would fulfill the Letter of Intent. If an investor fails to invest the total amount stated in the Letter of Intent, the Fund will retroactively collect the sales charge otherwise applicable by repurchasing shares in the investor’s account at their then current NAV. Investors qualifying for Combined Purchase Privileges may purchase shares under a single Letter of Intent.

Rights of Accumulation

To determine if a new investment in Class A Shares is eligible for a Quantity Discount, a shareholder can combine the value of the new investment in the Fund with the higher of cost or NAV of existing investments in the Fund, any registered investment company for which the Adviser serves as investment adviser, and any registered investment company for which AB serves as investment adviser that are mutual funds offering retail share classes (“AB Mutual Funds”). The AB Mutual Funds use the higher of cost or current NAV of your existing investments when combining them with your new investment.

Currently, the AB Mutual Funds include:

 

 

82

Required Shareholder Information and Records

In order for shareholders to take advantage of sales charge reductions, a shareholder or his or her financial intermediary must notify the Fund that the shareholder qualifies for a reduction. Without notification, the Fund is unable to ensure that the reduction is applied to the shareholder’s account. A shareholder may have to provide information or records to his or her financial intermediary or the Fund to verify eligibility for breakpoint privileges or other sales charge waivers. This may include information or records, including account statements, regarding shares of the Fund held in:

 

 

CDSC WAIVERS AND OTHER PROGRAMS

Here Are Some Ways To Avoid Or Minimize Charges On Repurchases.

CDSC Waivers for Class A Shares

The Fund will waive the CDSCs on repurchases of shares in the following circumstances, among others:

 

 

 

Other Programs—Automatic Investment Program

pre-authorized

 

83

(i) make an initial purchase of at least $2,500 and invest at least $50 monthly or (ii) make an initial purchase of less than $2,500 and commit to a monthly investment of $200 or more until the investor’s account balance is $2,500 or more.

CHOOSING A SHARE CLASS

The Fund intends to offer two classes of Shares: Advisor and Class A Shares. Each share class represents an interest in the same portfolio of securities, but each class has its own sales charge and expense structure allowing you to choose the class that best fits your situation. In choosing a class of shares, you should consider:

 

 

 

 

 

Class A Shares are designed for investors with a long-term investing time frame.

fee-based

You should consult your financial advisor for assistance in choosing a class of Fund shares.

HOW TO SELL SHARES

No shareholder will have the right to require the Fund to repurchase such shareholder’s Shares or any portion thereof. Shareholders may not exchange their shares of the Fund for shares of any other registered investment company. Because no public market exists for the Shares, and none is expected to develop in the foreseeable future, shareholders will not be able to liquidate their investment, other than through the Fund’s share repurchase program, or, in limited circumstances, as a result of transfers of Shares to other investors. Please see “Share Repurchase Program” below.

SHARE REPURCHASE PROGRAM

The Fund does not currently intend to list its Shares on any securities exchange and does not expect any secondary market for them to develop in the foreseeable future. Therefore, shareholders should expect that they will be unable to sell their Shares for an indefinite time or at a desired price. No shareholder will have the right to require the Fund to repurchase such shareholder’s Shares or any portion thereof. Shareholders may not exchange their shares of the Fund for shares of any other registered investment company. Because no public market exists

 

84

for the Shares, and none is expected to develop in the foreseeable future, shareholders will not be able to liquidate their investment, other than through the Fund’s share repurchase program, or, in limited circumstances, as a result of transfers of Shares to other investors. Thus, the Shares are appropriate only as a long-term investment. In addition, the Fund’s repurchase offers may subject the Fund and shareholders to special risks.

Rule 23c-3

The Fund also has the right to repurchase all of a shareholder’s Shares at any time if the aggregate value of such shareholder’s Shares is, at the time of such compulsory repurchase, less than the minimum initial investment applicable for the Fund.

24-month

(ii) follow-on

Determination of Repurchase Offer Amount

The Board, or a committee thereof, in its sole discretion, will determine the number of Shares that the Fund will offer to repurchase (the “Repurchase Offer Amount”) for a given Repurchase Request Deadline. The Repurchase Offer Amount, however, will be no less than 5% and no more than 25% of the total number of Shares outstanding on the Repurchase Request Deadline.

If shareholders tender for repurchase more than the Repurchase Offer Amount for a given repurchase offer, the Fund will repurchase the Shares on a pro rata basis. However, the Fund may accept all Shares tendered for repurchase by shareholders who own less than one hundred Shares and who tender all of their Shares, before prorating other amounts tendered.

Notice to Shareholders